ECO MCQ TEST 2 2015Report this Question as Inappropriate1. Which of the following forms of payment is not an incentive plan?A. Commission plans for salesmanB. Flat salary for a plant managerC. Bounses for managers that increase as profits increaseD. None of the above2. When relationship-specific exchange occurs in complex contractural environments, the bestway to purchase inputs is through:A. Spot marketsB. Vertical integrationC. Short-term agency agreementsD. Long-term contracts3. Suppose compensation is given by W = 512,000 + 217X(Profits)+ 10.08S, where W = totalcompensation of the CEO, X = company profits (in millions) = $200, and S = Sales (in millions)= $400. How much will this CEO be compensated?A. $812,431B. $43,400C. $555,400D. $559,4324. Long-term contracts are not efficient if:A. A firm engages in relationship-specific exchangeB. Specialized investments are unimportantC. The contractural environment is simpleD. A and C, only5. The solutions to the principal-agent problem ensures that the firm is operatingA. On the production functionB. Above the production functionC. Below the production functionD. Above the isoquant curve6. Spot exchange typically involvesA. No transaction costsB. Some transaction costsC. Extremely high transaction costsD. Long-term contracts7. Given that the income of franchise restaurant managers is directly tied to profits and theincome of the manager of the company owned restaurant is paid a flat fee, we